Why BigBear.ai, SoundHound AI, and AST SpaceMobile Shares All Popped This Week

Many small- and mid-cap artificial intelligence (AI) stocks have enjoyed strong weeks thanks to new economic data that led to falling Treasury yields. There were also company-specific events such as securing new business, analyst upgrades, and new product launches.

Since last Friday's close, shares of BigBear.ai Holdings (NYSE: BBAI) had exploded nearly 72% higher as of 1:05 p.m. ET Thursday. Meanwhile, shares of AST SpaceMobile (NASDAQ: ASTS) soared by nearly 34%, while SoundHound AI (NASDAQ: SOUN) had jumped about 13%.

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BigBear.ai scores a major contract win

The biggest news seemingly came from BigBear.ai, a decision-making AI company whose services can be used in a range of different industries. It announced Wednesday that the Department of Defense Chief Digital and Artificial Intelligence Office (CDAO) had awarded the company a contract to further develop its Virtual Anticipation Network (VANE) prototype.

VANE will help the government use AI language models to more effectively evaluate the origins of news media in countries that are not allies of the U.S.

Ryan Legge, the company's president for national security, said in a press release:

We are honored to continue our support in the modernization of our nation's defense efforts. This award underscores the importance of leveraging cutting-edge AI technologies to address complicated geopolitical challenges. By advancing VANE within CDAO, we are arming our warfighters with sophisticated intelligence capabilities to leverage foreign insights critical to the safety of our Nation and those protecting it.

The new contract was well received by analysts. Cantor Fitzgerald significantly hiked its price target from $3.50 to $8 and raised its revenue estimates for the full year of 2025.

BigBear.ai also entered into a warrant exercise agreement on Thursday with an existing accredited investor that will result in the company getting gross proceeds of $21.9 million. The accredited investor will receive a new unregistered common-stock purchase warrant to buy up to another 3.77 million shares.

AST SpaceMobile also saw its shares soar this week. The company designs satellites intended to be used for space-based cellular broadband, potentially allowing cellphones to connect to satellites even in dead areas. Earlier this week, the Federal Communications Commission gave AST the green light to try out its satellite connection services for voice, apps, video, and data roaming.

Cantor Fitzgerald initiated coverage of AST SpaceMobile on Thursday with a $30 price target and an overweight rating. The firm acknowledged that the stock is volatile and valuations often seem stretched. However, the company is likely to benefit from the integration of AI language models and government contracts.

SoundHound seems to be benefiting this week from broader market conditions, but the company did roll out new customizations for its chat voice assistant that it says will enable automakers to have more power over the "entire personality" of their AI voice assistants.

Exciting innovative companies can be overvalued

BigBear.ai, AST SpaceMobile, and SoundHound AI are all extremely innovative companies that have the potential to significantly disrupt each of their perspective markets. However, none of them are profitable yet and have all risen to multibillion-dollar valuations. Remember: There's no such thing as a bad asset, just a bad price.

I would caution investors from getting too heavily invested in these companies just yet. They are going to be extremely volatile, which can cut both ways. I would continue to track all three but not take more than a small, speculative position at this time.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.